During my first few years consulting, I helped business owners and managers learn to improve their operations and marketing -- the nuts and bolts of running a company. I helped entrepreneurs learn how to improve their profit margins and design more effective brochures. But over time, I realized that nuts and bolts weren't enough.
In today's competitive and changing business environment, it's not enough to know how to run a business -- you have to have a clear understanding of what business you're really running. You need to find a way to differentiate yourself from the competition. What you need is a clearly defined strategic position.
Today, defining a strategic position is as important for the proverbial "mom and pop" small business as for the high-tech company. One of my very first clients, a florist, taught me this back in 1986. This business was located in a neighborhood storefront and might have been perceived as just a typical florist "bucket shop" - a place where people pick up a dozen flowers on their way home from work. In fact, the florist specialized in exquisitely designed arrangements for high-society weddings and events, often importing flowers from Europe or the tropics. On any given day, however, you might walk into the florist and not be able to find so much as a dozen roses or daisies. It didn't try to be all things to all people.
This type of positioning better equipped the florist to deal with increased competition when both supermarkets and discount warehouse stores began selling cut flowers, and later, when customers could order flowers on the Internet. The florist was clearly different from its competitors.
A strategic position differentiates you from others. It shows that you have something to offer that's unique or difficult to replicate. When defining your company's strategic position, you want to look at:
- Industry trends and developments
- Competitive opportunities and openings
- Changes wrought by new technologies
- Your strengths and interests
After a few years in business, I had to struggle with defining my own strategic position. I had been doing a wide variety of management consulting, taking whatever came along. But just hanging up a shingle and saying, "I'm a management consultant," is like the florist who says, "I sell flowers." Yeah, me and who else?
So I started clarifying my company's position. By coincidence, I had attracted a number of law firms as clients that needed advice on how to build up their marketing. I came along at just the right time to meet the new trend in the legal industry to more actively court potential and current clients. I had the skills to perform such work. I wasn't an attorney, but I had worked with them most of my professional career, so I spoke their language. After working with a few law firms, I realized I could easily develop a strategic position, a specialty, in marketing law firms. Eureka!
There was just one hitch: I was bored out of my mind. Even though law firm marketing was a good fit with industry trends, market needs, competitive openings, and my skills, it just wasn't a good fit with my interests. Instead, I chose to differentiate my practice on the basis of the nature of the service I offered rather than the segment of the market.
When running a business, you have to understand your place in the competitive universe and then build your business to maximize that strategic position. I recently met a man who started a bank two years ago. After most of the local banks in his area were bought by huge national financial institutions, he saw a strategic opening. He developed a position of serving the local community, encouraging tellers to go out of their way to serve customers and reviewing each loan application individually, not just with a formula worked out in national headquarters seven states away. His bank has already developed a loyal clientele.
Your company's strategic position can be based on your market niche, type of product or service, quality of customer service, pricing, convenience, or anything else that will distinguish you from the others out there who offer similar services or products. There's no one "right" position, and your positioning will change over time. But defining your strategic position is a critical way to more clearly answer that nagging question, What business are you in?
Rhonda Abrams writes a widely read column on entrepreneurship and small business. Abrams is also the author of the highly regarded business plan guide, The Successful Business Plan: Secrets & Strategies. She has started and built three companies, including her publishing company, Running 'R' Media, and her newest enterprise, RhondaWorks, which plans to offer a comprehensive online interactive business planning center. Visit Abrams at www.RhondaOnline.com.
Copyright © 2000 Rhonda Abrams